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The $19,450 Phone

Although the Beverly Hills retail outlet of a newly christened company called Vertu is situated on a stretch of Rodeo Drive whose storefronts are occupied by Chanel, Cartier, Harry Winston, Bernini, Van Cleef & Arpels and Lladró, Vertu is, by design, concealed from the sights of window-shoppers. You can reach Vertu either through a rear alley or by walking straight through the Hugo Boss showroom, past the scrutinizing gaze of that store's nattily dressed sales crew, to the back entrance of the building, which is marked by an austere gray banner bearing nothing more than the name of the company and a logo that looks like an abstract rendering of a raptor's outstretched wings. Vertu is one flight up. It is generally open to the public by appointment only, and the hushed vacancy of its 3,500 square feet is broken only by the strains of ethereal New Age music. One corner of the room displays commissioned art from the British photographer Christopher Bucklow -- ghostly silhouettes of human figures that resemble vividly tinted M.R.I.'s. The art is not for sale. It does, however, prepare the visitor for an encounter with Vertu's specialized and highly self-conscious vocabulary of shopping. Initiates refer to the store as a ''client suite,'' to the service that Vertu's product delivers as ''the experience'' and to the product itself -- the world's first custom-built luxury cellphone -- as ''the instrument.''

''Sometimes even I slip up and call it a phone,'' says Frank Nuovo, 41, a founder of Vertu and its creative director, after he greets me in the client suite. ''Yes, in its core functionality, it is a phone. But once you understand the experience, you'll see that it is -- well, obviously, an instrument.''

Along one side of the room's expanse of white wall are three mounted glass cases, vaguely reminiscent of panels in a religious altarpiece. At the center of each case is a black void, a little smaller than a shoebox, where, beneath fiber-optic spotlights and behind electromagnetic locks, lies the instrument, looking rather like the well-appointed offspring of a remote control and a slender electric shaver. In the left display case is a model built from white gold, which sells for $13,000; in the center, an $11,350 yellow gold version; and on the right, the top-of-the-line platinum Vertu, which can be purchased for $19,450 and, for the first 1,000 buyers, comes with a certificate of ownership signed by Nuovo. (Not on display: the most basic Vertu, encased in proletarian stainless steel. Price tag: $4,900.) All of the phones feature a sapphire crystal face, a sheath of soft Italian leather for comfortable gripping and a backing and pillow -- which your ear rests against -- fashioned from aerospace-grade ceramics. ''This is an experience in exquisite design and craftsmanship,'' Nuovo assures me. ''If the instrument were made out of copper, it would still be worth what it's worth.''

Nuovo settles into a boxy leather couch. He is wearing a black leather jacket, an olive green mesh crew-neck shirt and pleated black pants -- all designed by his friend Jhane Barnes -- and a pair of black lace-up loafers made by a Finnish company, the Left Shoe, from laser-digitized measurements of his feet. He shields his eyes from the light, since he has just come from the ophthalmologist and his green eyes are dilated. Nuovo has some of the physical bearing of a younger Al Pacino, and despite having managed just three hours of sleep the previous night -- rather than his usual five or six -- he speaks in a rapid proselytizing stream. He directs my attention to the coffee table in front of us, where a module covered in black fabric stands on its end, like the slipcase for a rare reference book. This is the Vertu packaging, out of which, Nuovo says, ''we unfold the story of Vertu.'' He slides out the box's top shelf. The instrument rests snug and gleaming in a leather-lined molding. Nuovo and I stare at it admiringly for a moment. Its six rows of platinum function keys are set in a shallow V shape, reinforcing the brand's logo, which appears at the top of the phone nestling a tiny V-shaped speaker. Nubs of raised platinum protect the sapphire face from damage and, according to Nuovo, add an ''edge'' to the design, so that the phone ''has a character that is both flowing and elegant and slightly on the aggressive side.'' Its curving metallic lines nod toward Art Deco; the brash straightforwardness of its elements recalls post-World War II Italian modernism. It is just under five inches long and two inches wide -- common dimensions for a cellphone -- but it weighs in at a hefty half-pound. ''We're not going to simply coat the instrument in metal, which would make it lighter,'' Nuovo says. ''We made it the way it needs to be for robustness. There's a size-to-proportion balance that has a calming effect, like Chinese health balls. It fits perfectly in the hand.''

The instrument's keys are set on jeweled, rubylike bearings, which both produce a pleasant clicking sound with each touch and ensure that the keys will outlive those of ordinary cellphones by many thousands of repetitions; in the dark, the bearings also radiate a warm pinkish glow. The ring tones are polyphonic, have names like Raindrops, Constellation and Sandpiper and sound like motifs from Philip Glass compositions. ''What if,'' Nuovo muses, ''instead of buying a plastic phone, you purchased something that patinates beautifully?'' He removes his own Vertu from his pocket. ''Look at the metal,'' he says. ''There are no little dings or scratches. I've been using it for nine months, and I've drop-tested it onto concrete six times, and it's absolutely bulletproof for me. It wears well. Its surface builds character. It becomes a friend.'' Nuovo produces an elegant butterfly key from the packaging and opens the newer phone's ceramic backing. He empties the case of its battery and the subscriber identity module card that links the phone to its service provider. The platinum recess that holds the phone's guts is hand-tooled. The mechanical workings -- more than 400 parts, compared with about 50 in a typical cellphone -- are assembled in a factory adjacent to Vertu's headquarters near London by tradespeople who were largely plucked from the jewelry and watch-making industries. ''It takes hours to produce each instrument,'' Nuovo says, declining to be more specific than that. He points out an engraved hallmark on the back, which certifies the authenticity of the precious metal and identifies the phone as production No. 0032. ''I have prototype No. 1,'' he tells me. ''A gentleman whom I won't name offered me so much money for it that if I had any debts, they'd be gone. But I'd never part with it.''

Since the advent of cellular technology, Nuovo's phones -- as opposed to his instruments -- have found their way into the hands of more people than virtually any other technology product on earth. In 1989, Nuovo was working at Designworks/USA, an industrial-design shop based in Los Angeles, honing his skills on sewing machines, patio furniture, dashboards and exercise equipment. (The firm has since been bought by BMW.) He was assigned to a new client, the Finnish company Nokia. Nuovo has worked on almost every Nokia phone in the past 10 years -- more phones than he can count, he says, and each one, he adds, a notable commercial success. (Nokia hired him full time in 1995 as chief designer, a position he still holds.) During Nuovo's association with Nokia, the company has come to dominate the cellphone market, selling more of its product in 2001 -- about 140 million phones, representing more than one-third of handset sales worldwide -- than its three closest competitors combined. (Sales exceeded $30 billion.) For Nokia, Nuovo designed phones in splashy colors and phones with removable faceplates and phones the size of makeup compacts and phones with high-tech graphics. He demonstrated a gift for addressing the image-consciousness of funky teenagers and that of sober businessmen alike. In 1995, while working on designs for Nokia's highest-end phone -- the slick, palm-size 8800 series, coated in materials like titanium and aluminum but still assembled by robots on mass-production lines -- Nuovo began to fantasize about taking a 180-degree turn in phone design. ''If you look at watches, pens and eyewear,'' he says, ''those are technological products that are essential personal items. I thought that a communications device was ready to mature into something exquisite. It made so much sense to me that it hit me like a freight train.''

In 1997, Nuovo and a team of colleagues from Nokia presented the case for a luxury cellphone company to Nokia's president, Pekka Ala-Pietila. Nuovo's group had studied the ever-increasing -- and surprisingly recession-proof -- market for luxury items, including watches, jewelry, pens, fashion and cars. They noted that of one billion watches sold worldwide each year, three-tenths of 1 percent -- three million -- could be considered high-end. They pointed to the enormous success of Nokia's costly 8800 series, especially in Asia, and to the fact that many high-income consumers were replacing their cellphones once or twice a year. They observed, indignantly, that a small number of pirates were encrusting counterfeit Nokia phones with diamonds and selling them for tens of thousands of dollars to a responsive circle of Asian businessmen and Middle Eastern sheiks, regardless of the fact that the diamonds might impede the phones' reception and would, in time, fall out of their casings. And they argued that technology products have a standard life cycle: in their infancy, the sheer cost of new technology makes products prohibitively expensive and available only to elites; as a technology develops, prices are driven down, allowing products to be widely adopted; and finally, the product differentiates to serve the tastes of narrow market segments. Nuovo maintained that it was time to enter this final stage. The idea had an appealing simplicity. As Nigel Litchfield, Vertu's president and formerly Nokia's senior vice president for Asia-Pacific operations, says during a phone interview: ''My wife will go out for dinner in the evening and put on an expensive dress, expensive jewelry, an expensive watch and pick up a cheap plastic phone to put in her expensive handbag. What we're saying is, Why should the mobile phone be different from any other luxury accessory?''

The timing of the nascent Vertu group's pitch could not have been better. Through much of the 90's, Nokia's business grew at an annual rate of 40 to 50 percent. In 2000, the company agreed to finance a wholly owned subsidiary that would make luxury products under a different brand with entirely separate manufacturing and sales operations, much as Toyota does with Lexus. According to Wojtek Uzdelewicz, a telecommunications equipment analyst at Bear Stearns, the profit margins on Nokia's standard cellphones are a healthy 35 percent; the profit margin on a Vertu phone, he estimates, would be ''an order of magnitude higher.'' But Uzdelewicz notes that since Vertu is aiming for such a small market niche, profits aren't the major objective. What, then, is? A burnished marketing image. Uzdelewicz explains: ''If they can convince us that 10 of the key, hip, glamorous people are willing to pay $20,000 for a Nokia phone -- you can call it a Vertu, but everyone will know that it's a Nokia -- then maybe an average consumer like me will be willing to pay $10 more for a $100 phone. That's where they'll make their money. And they only have to find 10 stars to buy their phones.''

Nokia set up the new company under a code name to avoid tipping off potential competitors, and Nuovo and Litchfield charged a team of engineers with creating a luxury phone whose reception would not be compromised by a metal casing. Nuovo knew that even wealthy customers would be wary of the risk of technical obsolescence, so he required a phone that could accommodate upgrades. Ground was broken on the 65,000-square-foot corporate headquarters and workshop near London. Despite the high costs of manufacturing in England, proximity to the European jewelry industry -- and its vendors of precious metals and suppliers of precision mechanisms -- was considered essential. A sales staff raided from the luxury-goods industry cultivated relationships with specialty retailers like Neiman Marcus, Selfridges in England and jewelers in Switzerland, Germany and the United Kingdom. Plans were laid for ''client suites'' in London, Singapore, Hong Kong and New York, in addition to Beverly Hills. And in 2001, more than two years into the start-up, a name was chosen. ''Vertu'' is derived from the Latin word virtus, which means ''excellence.'' But, Litchfield says, it has another meaning as well: ''In the 18th and 19th centuries, wealthy individuals began to have small, personalized, highly crafted items designed for themselves -- typically cigarette cases or snuff boxes. They were known as 'vertu.' We see ourselves as the modern version of that tradition.''

Vertu made its debut this year on Jan. 21, at a reception at the Museum of Modern Art in Paris. Some 900 guests attended; Gwyneth Paltrow was photographed holding the instrument. Vertu began taking deposits for the phones, which would not be delivered until August, and Litchfield says that the response exceeded expectations, though he declines to cite sales figures. Vertu's marketers began to mount soft-sell events for target audiences -- a dinner for a group of Swiss bankers; a reception at the Andy Warhol exhibit at the Museum of Contemporary Art in Los Angeles, of which Vertu is a corporate member; a tour of the Richard Avedon exhibit at the Metropolitan Museum of Art for a group of subscribers to The New Yorker, in which Vertu has advertised. The aim was to generate a buzz among Vertu's most likely customers, members of a rarefied market segment that Ekaterina Walsh, an analyst at the consulting firm Forrester Research, who studies high-net-worth consumers, calls ''splurging millionaires.'' Of the four million millionaire households in the United States, Walsh says, 41 percent tend, to one degree or another, to spend beyond their means. (Vertu's surest audience, Walsh confides, is the 3 percent of millionaire households that she characterizes as ''high-asset delegator splurging millionaires,'' with assets of more than $2.5 million, little interest in managing their own money and an inclination toward self-indulgence.) ''If any technology product were to be marketed as a luxury product, the cellphone is it,'' Walsh surmises. ''A large number of millionaires aren't technology savvy, and the cellphone is an established, unthreatening technology. Everyone has one. Vertu doesn't even see itself as a technology company. Pretty much all the splurgers among millionaires will be interested in a luxury phone. Vertu's timing is perfect.''

In some quarters, though, Vertu's timing has been questioned. In a recessionary economy, a platinum phone provides an easy target of ridicule. BusinessWeek captured the spirit of the media coverage with a short article on Vertu under the headline ''Wretched Excess.'' Much mockery was reserved for the phone's round-the-clock ''concierge'' service, which is accessed by a push of a button and which, according to British Vogue, ''is ready and waiting to organize everything for you, from a table at Nobu to a holiday in St. Barts.'' Nuovo was wounded by the coverage. ''Vertu isn't about conspicuous consumption,'' he maintains. ''It's about a craftsman trying to make the very best thing he can. What do you say to an artist who spends hundreds of hours making a sculpture and then sells it for $2 million? Is that ostentatious? I'm an artist. This is my art. The Frank Nuovo element is the Vertu brand.''

Nuovo and I walk over to Spago for lunch. We are seated at a corner banquette, on the other side of a glass wall from Nancy Reagan and her entourage. Nuovo tells me about a concept he calls romancing the phone. ''It's about relationship-building with objects,'' he says. He glances at my wrist. ''Look,'' he continues, ''the functionality of a $5 Timex is likely on a par with a $50,000 luxury watch. But you can't compare the story of the two. You can't compare the emotional gratification of wearing something that was crafted over so many hours. People care about objects. In some ways, our objects are us.'' Nuovo makes no apologies for his own attachments. At his home in West Los Angeles he keeps a Porsche Carrera and a 1952 Bentley and a BMW and a Honda minivan, and he says that each of these vehicles allows him to exercise a different part of his spirit. When he started designing cellphones, ''black plastic was all we had, and phones all looked like business tools,'' he recalls. ''I would try to explain to people that phones needed to add color, and they would say: 'Why? It's a phone. It's pure functionality.' And I would think, No, it's not a phone!'' In Vertu, Nuovo ''wanted to take something as unlikely as a communications technology and present it as art.'' And why not? His artistic hero is Leonardo da Vinci, for whom the marriage of art and technology made perfect sense. Nuovo's expressive medium just happens to be the cellphone. Still, Nuovo realizes that a $20,000 cellphone might not gain an easy acceptance in a society as ambivalent about technology as it is about wealth, and he knows that he may not be able to convince skeptics. ''I'm not a marketing department,'' he says. ''I'm a vision department.''

We walk back to the client suite. I give in to curiosity. I ask to make a phone call to my girlfriend, Emily. The answering machine picks up. I whisper urgently into the phone: ''Are you there? Pick it up. I'm calling on a $13,000 white gold phone.''

Emily picks up. For a moment, we chat about our days. Then we talk about the quality of the sound, which I find to be crisp -- not without a hint of everyday cellphone quaver but surely a few notches clearer than the reception on my $99 plastic cellphone. The gold is pleasantly cool on my cheek, and the leather grip is plush, and the weight in my hand feels rather -- luxurious. ''What do you think?'' Emily asks. ''How does it feel?'' I consider the instrument. I consider the experience. ''It feels good,'' I say.